Prudential Financial (PRU) 3 May 182018 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Prudential First Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time.

As a reminder, this conference is being recorded. turn over to Mr. our like now the to call host, I'd Finkelstein. Mark Please go ahead, sir.

Good thank Businesses; Principal John morning our Brad. Pelletier, Rob Lowrey, you, Thank and Axel, Businesses; International Chief Prudential Grier, Chairman; Steve today's Financial Head Mark and of call. of you on call Falzon, CEO; Accounting are Domestic Officer. Strangfeld, Head Vice Charlie Rob Representing joining for Officer,

your differ then questions. prepared with by Mark we comments forward-looking will and It make actual answer the presentation We possible will start we statements. Today's and John, include materially may that Rob, predictions today. is results from may

In to non-GAAP addition, references include presentation this measures. may

hand actual the section For see our of the a that, factors on GAAP website to non-GAAP results reconciliation at forward-looking materially titled investor.prudential.com. measures be earnings cause press comparable will to those over from statements, such and forward-looking discussion differ with and found please in the of which can measures our it a measures could And to of John. statements release, that I

we go of after morning perspective remained Adjusted the Mark. remarks, will year. and and on to quarter. a earnings, specifics. provide my I'll Earnings cover underlying that main was moving segment near solid target you growth our exceeds the Retirement our $X.XX, Mark the from discrete hand that, good, at items, but us. our cover And reported for We in over number basis discuss for are in year equity and Good mid-XX% my had to a at were you, same a it Annualized Mark on XX%. to Thank asset-based the $X.XX will XX% market-driven across earnings topics. Investment quarter. very parts operating I'll momentum is high intermediate results deployment. core a level through, a including fundamentals, to first which above There the strong. the joining benefit solid In good excludes on were level, Management, businesses start return thank in the three comments Annuities. our businesses, the of I high-level Rob range, which of the prior through and business $X.XX I'll capital walk the to from Individual term and and earnings then on benefiting start

Group underlying We also international operations. saw in in steady results our Insurance improved our and margins business

results. we investment lower In prepayment normal than expenses lower is expectations, favorable offsetting year experienced addition, tax reform positive spread and corporate we due and and below less will prior know the than in investment the normal an quarter, non-coupon these were results and which to income Partially to incremental returns mainly items, our vary.

in Life In the actuarial addition, would year-over-year quarter that quarter. see first to lower by the across comparisons expectations uncommon which also results as Insurance are I updates. a last in Individual we result of impacted mixed underwriting not second experienced is segments, highlight year's

Retirement experience. was results Life business negatives largely and and to was offset in favorable particular, Disability extent offset positive in the on and modest. lesser impact adverse relatively Planner by Individual Life experienced Group mortality experience the a However, our largely and and case In net the good Life our Insurance business

we work mortality will manage businesses earnings and expect our such volatility. don't they well mix to match longevity that of precisely this dampening together contributed and we While to quarter, every

to the are for that observe earnings muted I'd net turning was to and reduce consistent operating Before to also impact. their of recent a like income with quarter fairly intended were volatility fundamentals, earnings. Credit the having business actions losses number

to contributing markets. program variable hedging Strong quarter the a capital adjusted over solid which particularly quarter. for XX% results In in in volatile value per is showed prior good our annuities net growth up is share, also addition, book income

and the tax to reflects turn While line of changes to high accounting increase see we At bottom at impacts I'll a start level, business of also the fundamentals. solid results. continue this now reform momentum. reflects XXXX, strong it

X% $X our business. billion first financial given upbeat and new were presence our by transactions as we we're which $X increasing timing growth we in looking outflows were to the as sales outflow a distorted our funds, year Group prior to the relating premier in proposition And the Investment strong In higher billion Individual the the value good of of remain domestic well We fee did sales with by factors, legacy large in outflow influenced is extent up benefits overall quarter, experience XXX institutional excellent This with pleased index X,XXX net seeing of through this success other net includes in our reported accounts also and flow a our that Results business, While Insurance offset we're episodic prior strength number. one. quarter the had to wellness an over our very lives. those flow account. year. operations. in reflected Annuities was inflows sequentially. will momentum value sales a business, our more our investment market about the by seeing over the sales trends XX% continue of Management positive XX% Likewise, are with although in story assets. the net growth of businesses, the expanding And or low than published not Retirement be performance of production

builds did net in in are episodic, sales quarter. a transactions pension transfers transfer activity solid risk year. not the seen and close we recent trend throughout have had where service flows, Pension the any risk we full While

healthy our execution track So, having to have in pipeline strength record market continued this said that, a and we position strong will leading believe lead and business.

continue good show businesses to international momentum. overall Our

of first yen-based products. quarter Although of XXXX our the year, ahead as the due prior sales surge were sales of down a comparisons, is to benefited repricing mainly from from in Japan this challenging

Looking strong our we in solid, through repurchase share both to were $XXX by U.S. Planner returned repurchases. to and in equally quarterly and and and dollar led products Life impact, of increase regard results productivity, the good Life in sales authorization capital share XXXX. impact split Consultant sales Japan. see With our we continue that about This reflects shareholders, to between dividend million XX% deployment, the for dividends particularly level

excess to it of Mark. our financial our that, with a We flow position. continue capital investing a and shareholders strong amount our while in in cash generate considerable our businesses between maintaining allocate and thoughtfully And to to returning the businesses all capital over I'll turn free

and or on Falzon for Good starting afternoon, you and for capital annualized share the $X.XX with solid it seasonally Annuities year-over-year a for morning, currency ago. joining constant and X. Insurance of which our year an this of up amounted $X.XX on in will implying John. liquidity of of basis. one-month good quarter, a Life's items leverage I'll was experience an on evening. growth Core then from ago, to comparisons in good Rob from through and overall year slide today. to EPS quarter, businesses market lag. of After and fees businesses, Thank earnings our highlights. our I'm over discrete basis, cover business, higher who share, market-driven earnings ROE benefiting compared performance our a the reporting continued per and turn adjusted the the you, Investment business Gibraltar results unlockings International $X.XX quarterly our I'll XX.X% impact in call the higher in from including Annuities consist Thank and elimination to After per $X.XX of tax income Management amounted quarter operating to adjusting $X.XX take for

as to lower prior in year the benefited quarter effective In compared results. addition, rate a earnings tax

While or million would highlight included underlying current I returns a that expectations. as couple that This items below expectations non-coupon our trend from average business quarter. refer which performance our items $XX average about quarter in varied was that includes considerations and prepayment the results investment we to income were of solid,

quarter. Life true-ups Individual our addition, business of reserve million $XX In about in had the Insurance

results was line consistent quarter with approximately in of relatively share. items per mentioned, with expectations, offset mortality GAAP included and net as investment of and negative John experience and tax realized these losses impact was $X.XX negatives was gains after current positives categorized businesses divested overall As impact our $X.X and operating net largely from a in amounts market across income, our The income which volatility. quarter the significant earnings adjusted in billion segments. despite to as resulted

the adjusted income. operating Moving items included not X, income shows in which to are affecting that net slide pre-tax

Product-related non-performance other Underwriting million relates by Our embedded of liability of hedging $XX and risk spreads was net the and to benefits. for a current weakened of of for as annuities our related results liability $XX in on expected. quarter our from duration on largely gains million. $XXX pre-tax and other the applying items compared and and investment income other wider primarily used and as divested mitigation million $XXX The a driven net business as largely had to dollar realized risk Three currencies, to items of living of asset derivatives management management primarily U.S. associated includes management note. impact million, $XX divested losses impact rates driven impact activities pre-tax our loss to business. of asset loss noneconomic risk The Care credit used derivatives the from positive derivatives hedges, currency million on loss by activities. in the certain GAAP businesses higher calculation were well the Long-Term by results as

up a of investments from costs. in was for to variable business expectations excluding a Annuities million average $XXX fee primarily our and will basis net lower separate results points prepayment Partially contribution in non-coupon current discrete our offsetting the primarily XXX each lower ago. to in risk fees results on by X, charges greater on million ROA, fourth a a policy increase modestly investment below was discuss compared quarter, investments from results and above to lower returns on million slide assets, X% quarter and Annuities segment, $XX quarter, approximately driven year returns and $XX a non-coupon were items. year the the spread due earnings prepayment $X quarter. or were comparative The income, on for account and million Moving and from down the starting annuity return as market-driven increase this expectations by management values increase ago. I contribution from the fees is reflecting

over variable higher As basis and previously billion time, our sales the our we effective this in what about points very XX% expect of we ROA quarter. term. a in X long-term medium were the Slide volatile short target stated, to level in Over than have to exceed Total that XXX year-ago the is XX% we our was Annuity well expect sales. business $X.X presents Annuity aging was quarter the management target that prior long-term as our our costs the annuity to level. program quarter ROA will of attractiveness and us of by sequential quarter. hedging our to X% the also and I environment was higher would the The to sales cause the above rate migrate current risk interest products. HDI primarily increase increase enabled higher driven highlight

will Turning to $XX deviated three comments Individual below Life what year-ago million on negative expect. items from results. focus well quarter the each quarter quarter impact I I'll of a slide we were $XX as were current the would There soft my a million X, items ordinarily our that quarter having expectations. lower in on and highlight, earnings than had

inclusive our claims and reserve associated less $XX was of amortization than favorable First, experience, million updates expected. reinsurance, approximately

higher higher than first in Notably, experience the frequency claims typically quarter we older higher typical claims of were quarter, bands. claims we in experienced While seasonality. age a this

as be impacts Second, and representative and we we skewed expectations. any adjusting were fees that items side. models. We than the earnings these positive below non-coupon about The after to negative adverse to adjustments reconcile could were of quarter, prepayment believe of actuarial normal results true-ups million. our adjustments actual make $XX $XX experience larger quarter we on power. quarterly from million investments experienced given for and this modest And In returns reserve would finally, negative

of premiums the Turning X, $XX business million, lower quarter. million to than based Individual new were slide Life sales annualized on year-ago $XXX

that our As and we reflects strategy variable sales service, and were declined universal actions by sales. expected, distribution, other and higher This offset and guaranteed universal partially life diversification specific taken. life product life have product

experience. more and favorable for to The on fees slide contribution a higher Retirement expectations ago. partially a below million investments by expenses, returns X, million and $XXX was results Current million than Turning The were reflects about contribution to ago. compared from from $XX net case offset compared quarter. the net non-coupon investment $XX million $XX current a quarter prepayment the $XXX lower results earnings year expectations spread quarter spread decrease to lower were investment million year above year-ago

we In addition, $XX continue This increase mitigated asset in experience prior particularly experience. than was favorable about our very benefited from also some quarter experience, million Current also an balances. the results expectations. case to case by which the spread more year, while was modestly compression, average this reflect which exceeded spread-based good strong

items of were solid investment reflect Turning will Results Retirement with full plan service billion the product sales. quarter, $XX.X I total to sales the X, billion current for few reflect deposits relatively by slide outflows Net current a sales the quarter institutional light consistent for ago. $X.X gross highlight. and year offset

transfer First, in pension there risk that the no quarter. closed transactions were

mentioned, our cases. focus As particularly larger lumpy, on we've be given can these transactions

a we have However, pipeline. robust

in we business, net outflows withdrawals. driven value by net Second, stable our experienced participant investment-only higher

Finally, by positive This over from in with year. net partially these good of $XXX values were billion, the reflects activity service the two X% net account appreciation market were earlier. quarter, by billion about well benefit Total items as increase positive flows in as year previously. Retirement $X as sales up noted past offset a from flows the planned full

from underwriting higher expenses. quarter our million ago. investment Turning experience, million a Life XX% to more by benefits Group slide $XX earnings XX. compared favorable favorable results, XX%, Disability for year partially of than The slightly lower increase total less quarter spread offset were and contribution to modestly experience. XX.X% net long-term primarily Insurance reflects $XX better more by offset to the target ratio favorable range results current of was reflecting The a Group as partially

business. the results Insurance We in continue be pleased to underwriting with our Group

sales XX, quarter. This sales new Disability. effective dates. reflects of annualized year $XXX most Group and our business XX% premiums in Current sales than Life Group based of to year-ago Turning the in higher first Insurance quarter slide calendar reflecting the occur quarter, were million increase both on higher

earnings fixed market ago. income XX. very driven increase to net year The under quarter, was Fee higher rates management driven which net slide expenses, average to X% $XXX Investment a asset on in the million related management $XXX reflects inflows for were in compared of and by equity Turning Management increase fees, a million assets assets remained consistent. management, under appreciation. by our have earnings

reported related $XX results earnings stronger three about In quarter which quarterly the would related below the This other million above earnings, is average over This items, retail $XXX addition, by excluding last mainly by revenue, result highlight the is net reflect about that of activity. business flows investing offset prior million a quarter, a Management higher plan. the $X market were billion, incentive also million first fees. higher contribution positive $XXX totaled inflows quarter. excluding Investment net the in the certain strategic as our other institutional money and income $XX of expense unaffiliated I transaction revenue cost due outflows revenues, third-party from to in seasonality years. were long-term Net $XX associated sequential of and of driven million. slightly fixed with The strategies, quarter of including million

billion $X very earnings. tied to index had mentioned, of that low-fee is strategy inconsequential John to we large withdrawal about a client As a

was offset ago. business spread from and growth a turning a results was The contribution Moving expenses. driven contribution for constant lower quarter The Earnings now by $XXX million XX. from to included to up less investment results quarter. favors from both concentration revenues about our the approximately insurance continued International Claims to the pattern quarter. benefited relation to estimate Life I current $XX business in also prior million partially the quarterly results period. Insurance in $XXX quarter fees investment with in highlight below current investments expectations favorable revenues million current $XX than quarter year our earnings by in that $XX by prepayment an first results the year-ago the that of to that compared spread million We increase from and expectations, in slide on were higher a million $X Planner by net mode annual a returns dollar net experience above and expected average average. ago, X% this would comparison non-coupon and year million approximately

$XXX previously in one-month earnings Life the the reporting now quarter quarter, Turning from earnings, which about the to was to in estimate of a due a We the the for slide revenues that second million elimination compared $XXX year This earnings quarter mode lag. were concentration ago. benefit XX, reflected were in to the quarter, annual current first to increase seasonally Gibraltar reported reflects million shift $XX the would million. higher of

contribution net quarter from experience benefits investments comparison on current below channels. and by quarter. million results growth, addition, results In approximately favorable in expectations in were prepayment $X expectations, all offset a with policy strong from to investment above increases These dollar in the partially product benefited million from lower sales year U.S. and spread non-coupon returns more business $XX fees, primarily ago

year largely ago that slide in Japan to $XXX basis occurred year ago. sales or decrease a million International level quarter, sales for reflects the elevated This by dollar quarter. in XX, to the down current primarily on XX% and constant $XXX lower were tied Insurance million from Turning is a sales the of

were new in the quarter Sales in dollar where Japan, of current repricing of in sales decrease Japan recurring Annuity offset products experienced savings a attractiveness business tax This dollar dollar-denominated drivers in U.S. driven a Japan in sales an the and in sales U.S. strong. continued products This sales partially of by introduction dollar the lower. large by was premium were partially You environment as of the XX% sales may products products. Brazil of advance in offset the denominated outside that recall year. year ago remain was last in Korea by reflects of This growth had quarter. yen year ago. on U.S. we advance in revisions of U.S. lower acceleration the increase

by particular XX, and current benefit tied decrease employee for Other for $XXX lower including slide returns. which equity million $XXX can Corporate million cost loss fluctuate expenses, & ago. to primarily in compensation the the a plans year The loss a which quarter to driven market compared was lower Turning non-linear to items, was are

higher addition, In income lower assumption year-end at last the net investment offset partially from following our pension income. plan qualified by year updates was

the items. seen vary Other consider to typically be We smaller quarter due loss expense on we the past, the in can Corporate than what timing we've As results this of quarterly basis & a to expect. would would

I'll Rob. Now to it over turn

Thank you, Mark.

update financial an key items Now to balance measures. sheet on XX, provide slide turning I'll and

Our from was $XXX company $XXX evenly from the share done million year. within $X.X supported of for in senior was of our the and from $XXX proceeds approximately our million businesses. distributions. cash Cash the authorization about This needs split parent between the March, year-end the shareholder million of board repurchases businesses driven dividends during billion inflows primarily issuance under at operating quarter $X.X amounted the about by billion of and million $XXX $X partially debt The assets liquid increase quarter. to billion of our at end by offset

within PALAC composite targets of the RBC also year-end as and ratios of remained here. or Our Prudential our and at as PICA shown RBC leverage the well total end quarter. are financial the as The first Insurance leverage XXXX ratios

to we with framework stresses. a Annuity level highlighted an to ability total economic CTE level moderate that have holding manage using that maintain includes we through the XX our As previously, risks assets

may a some target XX, targeted our book a March quarter be financial I our our significant excess regulatory call as of to investors and time AA roughly December impact XXXX, guidance value relative first continued and on of in earnings in ratio. we during fourth As in we international consequence, At were the XXXX. to levels ratios positive RBC the strengths these also quarter items XX, domestic of positioned over of well see adjusted we two above and PALAC's of variability capital communicated would objectives had XXXX that our over $X remind ratio billion. our

First, approximately the reclass in the a investments retained million we earnings. gains of impacts of implemented from of resulted net which AOCI accounting standard, treatment new unrealized $XXX equity to and

results we adjustment addition, lag turn approximately an the an to activity. In that back reflect eliminated quarter opening resulted John. over in result $XXX but in to not extra Gibraltar of our I'll operations, March with Gibraltar of instead through so equity it month This earnings, did in one-month reporting Gibraltar's January that, And million. first

We questions. Rob, would thanks, it open Mark. now for Thanks, like to up

Thank you.

Erik Autonomous Bass First with question will in queue Please Research. come go from ahead.

morning. Thank the the first, can block assumptions and Hi, claims Care trends that Long-Term you've you you. seen? the and on given levels in reserve industry, on I concerns good recent just legacy renewed guess the comment your in

Sure, Erik, it's Rob.

stage So, is me block. set of sort a relatively XXX,XXX It One got just small the couple of sort our thoughts. block. about let characterization of a the policies. with We've of

therefore, book of reserves, to of than of conservative inflation recent X% notable statutory, that industry. relatively and the are and our nature Also benefits. point what and more plan Our designs to are group book tend that's like lifetime is it more reserves. question, $X.X The percentages the statutory plan benefits of which benefits for about issued, a your in designs, is have from also conservative vintage, overall we've our billion things our seen across two-thirds lower instance, of

our assumptions book. it's look generally reserving more small the of And conservative side. peers We given industry consistent relatively a the So, are with level on that, feel comfortable pretty when we that and at with of that reserve. the

payout, book and the in only its terms and Now, experience our that recognize the also is we is relatively industry experience. of about of of emergence nascent X% in that

that, results assumptions period as any And and experienced you're we of period that others volatility going given to in XXXX that a we versus that data we're will what as as to So, vis-à-vis well, think emerges the see obviously, XXXX. have which result data saw we you in making. reflect in

with for every our were we'll remarks, year regard quarter, our in-line in We underwriting our second the largely update be so indicated moving quarter, first in to as were opening in into negative So, in expectations. but with the results, assumptions Mark results his XXXX process. that our XXXX

I billion As have call, our in about mentioned in in that last $X.X Care the of margins we Long-Term reserves block.

size So, time. given given of process come margin period to any, of that the the composition our block, if in absorb the block, the of given that out the very we're quarter well-positioned of assumptions we the have, second that we believe into might changes, going review of

if Thank conservative provide know provide And you of morbidity, detail you. into rate any peers. don't That's you But further relative drilling as whether can assumptions? characterized to interest the down helpful. you there assumptions, can in which terms any just mortality, it's or

spectrum dimensions we our those estimated others safe of have those mid we the at that think of and breaking to of So, how look sort separately, and to the very ourselves and difficult individual assumptions of calling every own that to a on one on and experience benefit and say I studies across those to those things. the of thing we're assessment it's we way context assumption any the more overall work, we provided conservative those assumptions of is sort would We consider the details be that any from at each industry out studies. out end without but look very haven't do, Erik, of

it, Got you. thank

Please question next will from our Ryan Krueger with go ahead. And KBW. come

good thanks, Hi, morning.

second in model review, updates you we Somewhat as key not similar just specific we but move be as the assumption that? thinking think of should about about anything that nature or into actuarial us that Care, to anything we help approach Long-Term quarter of terms but can

when is obviously, modeling, we last observations largely result during did can't as model comment that indicated talked that was off. process as last impacts we given year. kicking what's we The we And of – as transformation about, valuations, completed were result only a is So, second called that significant would quarter, we we the actuarial coming just make into on that of a I of we what that year, undertaking. really implementing have respect have to that process our were course the changes Ryan, with

done the this we So, at an probably have as revamps only outcomes to having result significant could we're major point. looking insight at I That's don't of modeling. a offer issue where

No, that's I on through mentioned Thanks. good. pretty And helpful. you on then think move color just can pipeline, the the additional PRT? But we looks some year PRT provide as you

that Ryan, question. it's answer I'll Pelletier, Steve

of of it's their plans case not a in mentioned in activity over the of the Mark As companies rate is what true the robust especially to fiscal We That helps past and it's year. unusual seen that segment in continues comments, his funding transaction in about. past. considerations in we've all transaction specialize which A spoken at course the immediate we've some But year of to very opening some over be I visible pipeline. see in not environment interest rising few of see the pipeline approaches build the the and the the unusual, driven large comments I've years. by That's echo course status. made over we would fact very market, improve seeing market, their develop a

is their to risk to of and awareness in transact plans. board, driven longevity the And remains propensity And enhanced. increased so, sponsors rising very across premiums plan of considerations PBGC inherent like strong, still the by ability transact

quality have in that to annuitants our to that driven fashion. in and populations bring emerges, we to considerations the same ability as visible successful we complex like and we our pipeline really a of very of large also to see we So, within think a the driven onboard seamless terms that the pipeline that and pipeline what business like again by ability large compete in our overall the of close, past. and The the transactions effort, ability

a thanks Great, lot.

Okay. go to John go Please Nadel ahead. of the line UBS. will with And we

it is a PALAC, for to risk-based questions. Two think equivalent everybody. fair One is CTE that ratio to to Or morning, on would X,XXX% good just to draw? that capital be and relationship roughly a XX? try Rob, the there, Hey, ratio RBC us poor

direction I And I'd on the cycle. manage is XX, Well, a used what said, that but we CTE modify to we've you you're block get phrase is just what that is through not going. the the the John, way

yeah. Understood,

Yeah.

ability through it's rates not maintain down that economic to up. but adverse equity markets like So today our popping cycle, XX%, being only interest an

of duress. CTE if that So, that, you it's XX a level under about think

Okay.

in So, a benign CTE XX? more environment, it's above

Yep, absolutely.

X,XXX%, it place around the something think about or below And, to this so level? that is again, is

the No, you what's is volatility volatility measure way John, (XX:XX) that affects of the lot tends of or volatile there's part between they're And it without ratio when in it you're how you're a reserves. that because this is it of baseball a capital challenge to that it, happening above works, when and of is the capital works XXX reserves getting down with the on have because, inside so, calculated XXX-ish very into sort all that (XX:XX), market, than differently but differently. mute depending around affects the

that And so you get level. lots of volatility above

closer at it's cleaner when to targeted it high. So, read the the the It's when much that actually too to to sort ratio much it's of level. it's hard look really into

more asset is the a by liability side is which and And supported mix in concept the terms the position. And the reserves. requirement, combines capital still way asset the changes of total both

similar period Thanks. Japan there understand Japan pricing for that down Planner XX% year-over-year. some certainly the sales in impact or comparison? rest changes. curious one in color. that I fact accelerated sales anywhere then year-ago a that more of about sales benefited Was from that that some think I And affected I I I Life Life of Planner ahead Charlie. Okay. appreciate the was world of have outside were the

There Korea, terms similar products. rate actually a change was was in a there in effect of a surge tax anticipation variable on in after

factor you happen that's and Other sales other So, caused you had the there the same places, outside but in was than decrease. thing and similar Brazil had that what goo there. a

Okay. Thank you.

Yep.

Tom with Evercore Please line we'll go go the of to And Gallagher ISI. ahead.

morning. Good

that is Rob, stat? GAAP for on Care. Just margin a Care, the follow-up X% or questions few on Long-Term Long-Term

The X% margin...

million The $XXX on....

million. the Yeah, $XXX

Oh I'm sorry...

is... $XXX million is what he

Yeah.

Tom. GAAP statutory So cushion of the in a I'm sorry, excess is that's cushion,

Got about reserves I $X.X have you billion stat? you. you was stat stats And said do differential GAAP between and think the

reserves side we filled addition holding so on GAAP statutory reserves the GAAP by that billion, our equity billion. equity. recall to to look at be statutory we GAAP about are and the the delta has in are way reserves, Yes, the the reserves, works, the at if $X.X you're But dealt $X look

statutory addition in got have of in where you a reserves in of your billion you've equity lower $X.X So, level equity statements. GAAP to sitting

drove And fairly if Long-Term provide what on It can Got was could I then color increase some a around just it Care in as big described the you bit incurred a know delta, color claims little it. of you. give adverse. XXXX? in you you

thoughts. Sure, I've so a couple of book. the size the mentioned about of before

be to so a And are well year relatively given represents book, so size than the claims you like less X,XXX, in during the as X,XXX well, had in volatile any a therefore claims Tom, as which of the outstanding. of the going our year, and X% period we size policies of the entire result of small that get

results then So, a underwriting size in and can had you you sample take small you take compounding be be volatile and just a and which themselves of volatility. which volatile can

specifically, had a or benefits lifetime saw our the claims a of generous more book. that so disproportionate vis-à-vis last we is sort packages representation And benefit what of year

ex less claims our lifetime than X.X% benefits. So, last that. But like book got has the were XX% year

what not to the So, it's sort book otherwise be. of proportional would

first reversion of small quarter, was in year. up Care we came vis-à-vis if like in in that – natural the average given so excess and think book the to – year part anything book what time, what over XX% of but which drove sampling the prior saw you we our think the fact the movement opposed back to was about up about just toward of don't results claim in a that at it's think just last being systemic. That's that are climb kind given matures, claims represents nicks just We that fact to only as Long-Term the book of going in through a X%. have if just as that's closer the to and the was profile volatility profitable severity our of you And book. we is incidents, our And look operating

I the when really Got it. up incurred you only but over Because, looked claims XX% the were That's helpful. X%. was up Yeah. they at think actual incidents

benefit So claim of drove that's is because the ultimate the expectation so the right really what lifetime work way to interpret claims duration would that that? issue that a it's like the way connection, of those be filings

Yeah. Absolutely.

based it. it's characteristics generous policy a with estimate the a the the reserve be an larger extent So, policy, have and on associated would to more to going it's of

driving the reserving Thanks, and experience insurance riders of weakness any that on one. Long-Term claims insurance life there? then the you're one life on and/or policies, Care is final seeing

Tom, of Steve. comments, items calling aggregate them a are but what Mark vary do quarter-to-quarter, this that his with all No, the them we you in favor, relatively with can in this true-ups as they business. Those us, against said to the has in anything our of as go quarter the that worth so last impact felt tended is on opening characteristics are Life to but out. on no our Those rider saw items, reserves. they bunch as have that recently it several they quarter, don't went so from was small

Okay. Thanks.

question from go JPMorgan. And our come next will Bhullar Please Jimmy with ahead.

Hi.

couple how flows next just a net the of bit, sales. a well. The your of picking been that something just increased book wondering of have else business years? that's the over going up question views your affects on little on and in annuity there's aging if as withdrawals if of because sales Annuity And First but the have the or variable

question I'd sales. Steve. a say first address pickup it's Jimmy, solid did things. in I'll year-over-year. of your by sales We have couple a addressing characterized that's

improving an In the make to First we in around Labor products and judicious there's ways in Department particular able in rule especially that some helps quarter of markets case, – were that outcomes contributed certainly the of PDI, competitiveness our ways also and distribution overall first to of sales. to basis. our sentiment fiduciary on all, HDI that generally and measured enhancements

pretty unique ability any our a monthly direction are on pricing we changes basis. to in that in recall make will You

the we the of the some able attractive on our when was so, say, rising and were cusp business at-issue we measured competitiveness returns. the saw I rate positive our And still make to product enhancement impact over returns, like while writing at a saw having to we move that environment very that year nimbly. And,

think much in also is side. saw withdrawals, of is to and part of function that our phase lapsation So, And the way years the aspect the payout that and active we lapse in very anticipated quarter. benefit. that I'd In say of of aging contemplated particular that the business, of business that's into you sales in the increased there's dynamic on to as the natural risk manage I book of the we the something that more couple again, moves this utilization a is in ago. we the about spoke in more

we opening rising this in environment. We expect lapses a upon to rising rate touched see to his comments, expect see – and Mark in

way the couple pick-up the way will inconsistent the the It's to lapsation talking of call business too I the now early duration a standpoint. However, given out type trend, point that with a but we've of we in liability, about seen management of increased lapsation. not approach some from is quarters a we're risk

product Japan, question your I and you half, in And to assuming the in pivoting your lap what's well. of that products. Where On in process the product of had the in as through begin on comps recover the second guess you sales will I'm but sort the mix? a difficult been that? view I for as they've shift towards pressured whole are And portfolio by Charlie, Okay. non-yen sales

able sales down dollar what as but were XX%, said, to were was U.S. we pivot do was to to right. Jimmy, product, So,

So, sales premium that because partly took because surge our recurring repricing and of of down, of the product. place partly were the yen-denominated

know, channel. So, sell don't yen-denominated but in we repriced no do product we we've any recurring some sell premium anymore really as we product, significantly. virtually Japan in that single-premium you – sell But

were sales pivot are there, through, of sales sophistication force And we because so, that the see to of the such XX% dollar we but we total sell decrease U.S. our in now did and sales a almost channels able which in sales. of the

nimble So the Steve will I the think same thing word before answer, I here. his in use used

that have of terms product. and innovation, product, in We in able the new sophistication the selling force product in pivot, terms of to of sales terms of been both dollar-denominated new in

this, the decrease continuing the that through of be I say, yen-denominated there would we product in way have. some most but we're So, will

a you'll recurring in leveling dollar the well. premium I but So, going off continued a forward is think as of what U.S. sales, sales increase see yen-denominated

Okay, thank you.

next Wells Please to question And go will the with from come go Sean we'll ahead. Dargan queue Fargo Securities. in

linked Can from Hi. Thanks. what $XX the about give about on exactly? an you an the business. I have a release loss press LTC million item question derivative that to was color some

Yeah. it's Rob. Sean,

ALM, with we treasuries, is in it's a of that do have therefore, to corporates order us able to the derivatives And very proper long, for to and within nature order very instruments, the be out and of duration. Long-Term to liability got cash a complement the extend in So, long combination Care use duration.

interest long that mark-to-market interest swaps So, receiver they portfolio. course that to. rate net did in the that's as swap number rise, Obviously, Long-Term Care rate a swaps on And that is so of are interest the during as referring rates the we – the negative. in you're the quarter,

being present mark that the is a going swaps, right, So, in on the negative reflected on the are if liability the asset in mark of as be value theoretically it's there, change the think any a in conceptual liability, of positive duration sort well. to change value the the offset about of which by you construct

ALM good have that? duration whole to matching. the a follow between that's up you So, Is or that doing idea and clear did

clear. that's think I No,

like with first not was quarter. hedge Just sticking hedging, the side in increased the the seems on volatility it returning, breakage material with VA

viewed any have you the if comments wondering Just you how about slippage quarter? qualitative in

Yeah.

prior excess of on periods vis-à-vis anomaly an just So, very was was of in is made lots point, time. volatile X%, remark you quarter where was of which the it that We quarter. the volatility was in a had of which sort that days

having was than of we had of less days So, those I all X% think of excess XX in XXXX. compares excess of where that days in and it to volatility in XX

So, lots of volatility there.

trade were that the twice of day, during of volatility is that of the rigorous very couple of usually a day. level probably the of volatility. the that of five, couple course program. hedging four, was have trades a the The times a six do trading high But of during hedge rebalance they we'd they the We of a during They a implication end times, as probably result are day that that result times rebalancing efficiency. level

XX% So, we outcome. as excess that good in feel and indicated, about was of it Mark

million breakage, And gross the a so from for was quarter. some on that, lower a cumulative hedge of actually the significantly reversion we had where level basis around $XXX today. seen well, number negative hedge we sit while on We've of as breakage

equity So, is we We only program market. that think from but from that volatility us, robust. not declining also think a protects

given number de-risk course business. prospects of of good that book, feel done years to book we about the quality that of earnings So, things Annuities both the and the of the our over we've

it's Mark. Sean, Yeah,

additional comment. one Just

resources human process. this dedicated hedging to We have substantial technology and

about that to for Rob rebalance when example, several reflects times, in so, the big capabilities within that a investment this getting talks right. we day a And have

Okay. Thank you.

Please Partners. And & go Dowling come from our with next question will Humphrey ahead. Lee

Good my taking question. morning for and you thank

Regarding strong. you a were the and to in really the taking market Group drivers are market? wondering, I in certain what sales just of was it quarter, share the your was part

I that sales that and the in the is marketplace. to wellness Humphrey, strength really strength value Steve. of our proposition Group financial resonating we this say would of the much see how is very attributable our

the our You deepen Again, real back come And over and our we extensively that year, of full the and of Group program. past service spoke is people, last that our few our using our example. strength business. proposition. years harkening been year all spoke via Retirement I'll data capabilities about progress recall to about to the business wellness analytics in financial digital that who and relationships taking an we and investing effort to individualize the Investor Day, see businesses us in across channels, value the capabilities really give about significantly via last you individuals at Pathways and with those workplace and Investor this Day we've the exist we

our education offer You'll which individuals recall of Group planning clients. financial this who employees of is advisors Prudential and financial seminars the top Retirement and program some our by to are

who program I numbers companies, was people year employ that think those the plus. up companies numbers are that million we cited collectively last by XXX Today, were taken X being you for collectively plus. who XXX million X employ people

sales and composition About to And the as we're lives, And XXX the occurred And that market, in pickup marketplace. by their well, that Mark the our we're benefit in we're as say XX%, was to driver X,XXX that XX% overall pleased where major pickup, our the individuals quantum really but to tangible able mentioned. so resonating premier I'd our it employers by offer type presence. is of of of in Group to not sales. build really of of that the trying just growth

quarter. we feel very So, in results good the Group about

on to point When on sales. in the talked And you're just is first This we've show point. that on. that hearing think the proof initiative proof will Mark, in said meetings, wellness add I good Group Steve about returns early investor this we've from up

shifting it. And Got then gear Management. to Investment

fee by coming that we quarter? to inflows like about you in, of you $X current gross think how inflows You low index billion talked the billion $X.X and product. the between have fee the differential If describe the offset in about high fee the were would outflows, but

income certain was very areas And fees. part to business components the the our differential all, as legacy, our to basis the attract But absolutely de minimis. our of relationship. single this continue come basis wider, that from quite Humphrey, the real continually business don't large fact outflow on fee long-standing do we as given a are relates This was reasonable strategy, that couldn't the to they the of of where much estate it able continue business larger say be fixed would was fee at a I passive we and to which absolutely inconsequential. such was on frankly inflows, part of a –

secular put basis in this an across we've in average business constant that, to been means XX range of inherent in very, book the management, to keep together on asset that before. where age active you point pressure our that All entire able cited very we've there's even of fee our fees basis

it. you. Got Thank

go from Sachs. Please will Scott ahead. Alex our And Goldman question next come here with

Hi.

outflows some just asset and sort had bit The going that and is intensive, the might would be contribute first you I how question and much to guess, capital running you describe, Could more total declining off Annuities just asset the quickly of deployment? stuff capital back little the given net to expect that I that's a given how was the requirement. of total requirement to

So, Alex, Rob. it's

I earnings out about out it operating dividending flow of our capitalized earnings as that cash and in business. think to capital ability in are, our less and free ratio coming we the we're fairly that sort of more off in terms of well the about are the be form terms that business because of aggressive as of

run at took and so of last if of quarter that our around took from in of returns that after-tax rate $X of business. in dividends the business – on the the that worth an you $XXX basis, actually $XXX well. earnings we over look million if So, dividends out or billion excess of in would $XXX compares And or million sort business million at Annuities to quarter. in dividends report look of as And PALAC the we year, business from first out in you capital we the

feel out earnings. us aggressive capital very about dynamic be very dividending we the the good about side allowing So, occurs on that to

have to do stock share of of flexibility that proactive you any repurchase more And at be prices? attractive sort and to accelerate

revisit by billion year, quarterly rate all this the this stock repurchases stock XX% of $X.XX to our dividends stock to issue, the is feel question the belabor increased how buybacks. Well, by a Obviously, dividend so so – time. and stock that get we our about we different both the prices simply recall we saying repurchase, on which that's us $X.X I'll and our

free about dividends is to from buybacks to it we of was level As XX% at calibrated that XX% sort our ratio ratio. of brought thought and that, around before. flow cash where that We've free stock flow cash up

of just earnings under look first at represents dividends in the the you XX% If quarter. buybacks, it the our and

So, are, opportunistic in that you we towards got see businesses, growing to some some to flexibility where order inorganically. cash organically our some can but flow deploy of we've keep we either free against sort in to the room be of or like

of Got in? it. last to impact it And we later didn't low Will how the year? there? of that then headwind an can start quarter. you be the to give expect I sneak see appear a in mean much rates one I on segment, one an be much can On update you'd this having International to

We've low. in be going interest operating remain low period we interest Japan I environment No, Recall rates long headwind. The we hedged that so. of in currency. been rates, the think been terms don't think in they And don't a it's have for low, of to a time. a

we're And so, I are. comfortable we where with think

much. very Thanks

have question. more we for Brad, one time

Thank you. ahead, with Barnidge John That will sir. come from Please O'Neill. go Sandler

Thank you.

interest even can as well evaluations where asset in Given you as your for you Thank life acquiring your traditional insurance, businesses, in fallen blocks, about have answer. year talk asset manager? this or managers, whole a

as growth. relates see is today you that Steve. asset product of business certainly have management. in growing I'll relates organically. the to it virtually your address John, – is We very been business successful it question entirely to this The organic as our

are we've However, we open before, inorganic growth. as mentioned to opportunities for

those at very mindful opportunities, undue disruption of management However, social the the in looking of in avoiding we're business. asset importance

attractively overall deals what broad-based necessarily a multi-manager Matters what like interest neatly model, asset relatively that of large to might opportunities that we naturally you'll neatly capabilities size, very, have nonetheless, call utilize that multiple smaller will rather is opportunities tend can might that bring And probably in than the or not into fit so, of architecture slot very but I size this we can our but efforts efforts multi-manager us. think such integration model. classes, for the we in see feel greater be things into rather across our

inorganic of mortality always one that opportunities basis, the opening the we pretty but Life John continue the also longevity way on mentioned in mortality On comments. ways for are equation to of side we at Certainly, front, strong sales well. are that, as to looking bolster our look the doing his levels

Great, thank you for your time.

conference And, AT&T does that for today. your teleconference. ladies conclude and for and our Thanks gentlemen, using executive for participation

now may disconnect. You